 |
| A Whatsapp icon is seen on a Samsung Galaxy S4 phone screen with a Facebook logo in the central Bosnian town of Zenica, February 20, 2014. |
(Reuters)
- Facebook Inc's purchase of fast-growing mobile-messaging startup
WhatsApp for $19 billion stunned the markets but analysts said the deal
made strategic sense as it will solidify the social network's position
as a leader in mobile.
Facebook shares were down 3.1 percent before the bell on Thursday, representing a loss of about $5.4 billion in market value.
At least two brokerages downgraded their
recommendations on Facebook to "hold" but the overwhelming majority of
analysts remain positive on the stock.
Facebook is paying more than double its annual
revenue for a chat program that has little revenue. The purchase price
is slightly more than the market value of Sony Corp.
But analysts pointed out that WhatsApp currently
has over 450 million monthly users - second only to Facebook - and
boasts an even higher level of engagement.
"Facebook is the leading global social-sharing
utility. Now, it has a significant opportunity to be the leading global
communications utility," RBC Capital Markets said in a note.
WhatsApp is much stronger than Facebook Messenger
in Europe, Latin America, Africa and Australia and has attracted lots
of young users at a time when fears have been voiced that young people
are tuning out of Facebook.
Analysts said the price tag for WhatsApp, founded
in 2009 by former Yahoo Inc employees Jan Koum and Brian Acton, seemed
reasonable from the point of view of value per user.
Facebook is paying $42 per user with the deal,
compared with a market value per user of $170 for Facebook and $212 for
Twitter, Deutsche Bank's Ross Sandler said in a note.
WhatsApp has more than 450 million monthly active
users, compared with 1.2 billion for Facebook. About 70 percent
WhatsApp users are active on any given day, higher than Facebook's 62
percent.
Of the 44 analysts who cover Facebook, 37 have a
"buy" or a "strong buy" rating on the stock, according to Thomson
Reuters data. None has a "sell" rating.
"Facebook continues to demonstrate savvy-ness
beyond its years as it pivots its business model, footprint and strategy
to mobile," Deutsche Bank analyst Ross Sandler said.
Analysts have commended Facebook's ability to
make money from its mobile app even as investors fret over concerns of
youngsters ditching the network. With the WhatsApp deal, all eyes are
now on the monetization potential of the chat program's huge number of
users.
"While we don't expect messaging to be a
meaningful near-term or even long-term revenue driver, the real value
could be the evolution of the platform to incorporate new functionality
such as payments, app distribution, social features ...," Macquarie
Equities Research analyst Ben Schachter said.
Some analysts, however, said Facebook was paying the high price to keep WhatsApp from being snapped up by a rival.
"Facebook shares would have been pressured by
more than single-digit percentages in after-market trading if Google Inc
had purchased WhatsApp instead," Stifel analyst Jordan Rohan said in a
note.
Pivotal Research's Brian Wieser, who downgraded
his rating on Facebook shares to "hold" from "buy," said he expects
Facebook shares to face pressure in the near-term as investors come to
terms with the risk of future acquisitions.
Facebook shares were trading at $65.95 in premarket trading.
~ Soham Chatterjee and Saqib Iqbal Ahmed
0 comments:
Post a Comment